Many people discovered newfound hope in online selling amid the harsh disruption of COVID-19. But now, in addition to the things that they have to attend to – such as promoting and shipping their goods to buyers – virtual sellers will seemingly have a few more responsibilities, courtesy of the Bureau of the Internal Revenue (BIR).
The government agency announced last week that persons or entities engaged in business or earning income from “digital transactions through the use of any electronic platforms and media, and other digital means” are required to register and be “tax compliant.”
According to the government agency, the directive applies to payment gateways, delivery channels, internet service providers, and related business facilitators. However, BIR Deputy Commissioner Arnel Guballa insisted that the agency’s focus is more on bigger businesses in online selling and not, for example, on entrepreneurs who started selling food during the enhanced community quarantine (ECQ). If your online business is in scope, here are five things you should know about BIR Revenue Memorandum Circular No. 60-2020:
- There’s a deadline. The BIR has implemented a July 31, 2020 due date for businesses to register or update their registration status. Meeting the deadline means the agency will not impose any penalty for late registration.
- Your past is voluntary. And by “past” we mean your previous business transactions. The memorandum encourages sellers, merchants, and other stakeholders to "voluntarily" declare their past transactions subject to pertinent taxes and pay any amount due. There will be no penalty for doing so, as long as you complete this before the deadline.
- Ben was right. The uncle of Spider-Man (Peter Parker) was right, and we paraphrase him: With great online selling power comes great responsibility. Being compliant also means that newly registered business entities should do the following to adhere to the Tax Code: Issue a sales invoice or official receipt for every sale of goods or provision of services; maintain a book of accounts and other accounting records of business transactions; withhold taxes, as applicable; file required tax returns; and pay correct taxes due on time.
- TIN required. A person registering a business should have a Taxpayer Identification Number (TIN). Other requirements for complying individuals include a certificate from the Department of Trade and Industry, if the business has a name; a government-issued ID; and payments for registration (P500), documentary stamp tax (P30) and for receipts (how much will depend on a person's choice among accredited printers). Non-individuals are obligated to present, as applicable, either a certificate of incorporation, recording, or license to do business in the country from the Securities and Exchange Commission. Additional requirements include Articles of Incorporation or Articles of Partnership; and same the fees for registration, documentary stamp tax, and BIR-printed receipts.
- Is your business in scope? In Jun Ramirez's report for the Manila Bulletin entitled "Bloggers, filmmakers earning from digital ads required to register – BIR” last June 18, he listed the digital merchants BIR Deputy Commissioner Arnel Guballa identified as entities obligated to comply with the directive. These are e-commerce platforms; internet retailers of consumer goods; digital service, membership, and subscription; digital transaction through the use of electronic platforms and media; online blogging, film makers earning from advertising through their online channels; and ride-hailing services for food, transportation, delivery, or merchandise. Take note that the government executive said that only businesses earning more than P250,000 yearly will be required to pay income tax.